Most Common Accounts Payable Process Issues & How to Counter Them
The accounts payable (AP) department is one of the essential parts of any business structure. It’s highly important for your business’s growth to run your AP department in a streamlined manner. However, there are serious accounts payable process issues that are enough to give a headache to the senior employees as well.
Overcoming these issues and getting fruitful results should always be the first priority for any business. If your business is also going through the same problem, we’ve got you covered. In this article, let’s shed some light on some of the top accounts payable problems businesses face and some amazing tips to overcome them.
But before that, let’s see in brief what accounts payable exactly is.
What is accounts payable?
The accounts payable contains the amount that is payable by the business to other businesses or entities. This amount appears as a current liability in your business’s balance sheet. Any purchases made on credit are countable as accounts payable and is due to the creditors.
Your business accounts payable give a birds-eye view of your business state. If it’s increasing that means your business is making a lot of purchases on credit. On the other hand, if it’s decreasing, then your business is making payments to the creditors more than making new purchases. Accounts payable is, therefore, critical to maintaining cash flow in your business.
Now, as you are aware of what accounts payable is, let’s discuss common accounts payable process problems businesses face.
Accounts payable process issues businesses face and their solutions
Complicated approval process
The biggest problem your business can face while managing the accounts payable is the long approval process. According to Ardent Partners, 47% of AP leaders actually feel that the lengthy process is one of the big challenges they are facing.
While it’s good that the amount going out from your business is being reviewed by all stakeholders, it actually slows down the process. This wait can actually cost you your credibility as creditors would expect faster payments.
It’s easy to solve this issue, though. Streamlining is the key. You can set-up a single staffing group to process approvals. This way you can save a lot of time. Establishing a hard-coded system that can take decisions in minutes can do magic for you. It will not only speed up the process but also curb the rate of human errors.
The foremost account payable problem is not having a robust invoicing process. Late and faulty payments can strongly damage the reputation of your business. Common examples of faulty invoicing include missed payments, double payments, manual payments, etc.
Most of the businesses have nearly solved this problem by using an automated accounts payable system. You can also streamline the process by taking accurate details from the third-party businesses and verifying those details. Having a simpler approval process can also clear pending items faster.
Risks of manual data entry
Manual data entry is an invitation to many human errors. Additionally, it also asks for a lot of resources. If your businesses solely rely on manual work, it’s at the risk of many problems that appear due to manual errors.
To avoid this, you can always leverage the power of automation. It not only saves time and resources but also diminishes the risk associated with manual data entry.
Apart from manual data entry, managing your business on paper can prove damageable for your business. In a survey, it was found that 57% of businesses said that they are using paper-based invoices and that makes this issue looks incredibly scary.
Bringing in digitization, leveraging the power of automation, developing and implementing software solutions, etc. can help you in the long run. Saving data in a secured server instead of physical files and allowing your team members of multiple departments to retrieve that information helps you streamline the entire process.
Online cyber fraud threats
The threat of cyber frauds always looms on the businesses and industries that have leveraged digitization.
It’s essential that you maintain the rigorous security of your systems to make it threat-proof. Leveraging world-class security standards should always be your first priority to strike off the risk of cyber frauds.
Accounts payable automation or outsourcing
By now, you must have understood the importance of maintaining your accounts payable process through automated software. You can always outsource the task to the agencies who are using state-of-the-art automated systems that can help you streamline your accounts payable process. It also saves you from hundreds of problems caused due to its mismanagement.
Eventually, all sums up to streamlining the entire accounts payable process. It’s no rocket science, though. If you can fix the above-mentioned accounts payable process issues at your business, your business will never fall prey to late payments, mismanagement, etc. Your relationship with the vendors will go to newer heights and you will receive more rebate from the high volume of buying.